Nifty ‘Future 50’ visualised
stocks of large, well-established firms. This is understandable, as these stocks provide steady returns, pay good dividends, and are not likely to crash due to a change in fundamentals. Large, stable companies may face challenges but are likely to overcome them.
These companies have overcome challenges to their growth and have achieved the position of market leaders. Thus, these stocks are desirable to investors who seek stability. These companies also tend to generate strong cash flows, which enables them to be generous dividend-paying stocks.
This adds to their appeal. Most investors who buy shares of these companies are not looking to make fast profits. Instead, they want consistent compounding stocks.
These stocks provide steady, long-term growth, along with regular dividends. These stocks have another big advantage over other stocks in the market. They form a part of the benchmark index.
This ensures a continuous demand for the shares from not only index funds and index ETFs but also regular funds that benchmark their returns to that index. All these are compelling reasons to consider index stocks as a strong investment choice. But this is only one side of the story.
The other side of the story involves finding the stocks that could grow to be a part of the index, i.e., grow big enough to be included in the index in the future at the expense of an existing index stock. Why is this a good investing idea? Indices are not permanent groupings of stocks. The number of stocks will stay the same, but the composition of the index will change regularly.
In the case of the Sensex and Nifty, stocks are removed and replaced year-round. Thus, only a core group of stocks remains as ‘regulars’ over the long-term. Unsurprisingly,
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